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Now Is the Time

If you want to make money in any market, follow the money.

A few weeks ago, many of my fellow analysts from the Rule Breakers stock-picking team met with the movers and shakers of Silicon Valley. They rolled up their sleeves, asked key executives all of the hard questions, and reported back to the growing community of Rule Breakers newsletter subscribers. They visited some of the more dynamic publicly traded companies, and knocked on the doors of the rapidly growing, privately held upstarts that will undoubtedly spark the Valley's next wave of successful IPOs.

I'm telling you what they're doing to illustrate what they are not doing. They're not pitying themselves over the roughly 40% plunge in the major market indices over the past year. They aren't curling into a fetal position because the country's financial system is in disarray, nor because the newsletter service's scorecard is getting smacked around.

They're doing the right thing: Using their minds when the rest of the market is losing its mind.

Move in for the big momentNow is the time, my friend.

Time to buy? Are you nuts? How am I supposed to know that? I can't tell you whether the market is going to plunge another 10%, 20%, or even 30%. No one can. However, I can tell you that if you spend these next few hours, days, and weeks researching the companies that will bounce back the strongest when the market does turn around -- and it will -- you won't just beat the market. You will obliterate the market.

Now is the time ... to think.

The easiest way to beat the marketInvestors tend to throw the baby out with the bathwater. A bad earnings report or a sector wrinkle can send the entire market for a dip, even though many of the roughed-up stocks are perfectly fine.

Struggling companies continue to dominate news coverage, with eager commentators debating their solvency. But in avoiding those troubled businesses, you don't want to look for stocks that are just staying intact during the downfall. You want to find companies that are improving during the deluge.

How can you do that? Simply collect the names of companies on which analysts are jacking up forward earnings estimates, at a time when the general market is being talked down.

You probably didn't expect a whole lot of optimism out there in a nervous market, but there is some to be found. In fact, here are seven stocks for which market watchers have raised their profit targets for the next fiscal year:

Next Fiscal Year EPS Estimate

Company

90 Days Ago

Today

GeoEye(NASDAQ:GEOY)

$0.63

$1.02

Jackson Hewitt(NYSE:JTX)

$1.73

$1.75

McDonald's(NYSE:MCD)

$3.81

$3.83

NetScout(NASDAQ:NTCT)

$0.77

$0.89

Multi-Fineline Electronix(NASDAQ:MFLX)

$1.48

$1.93

Family Dollar(NYSE:FDO)

$1.85

$1.88

Corinthian Colleges(NASDAQ:COCO)

$0.83

$0.86

Source: Yahoo! Finance.

That's an eclectic -- if not entirely unexpected -- collection, is it not? Some of the thrifty plays like McDonald's and Family Dollar make sense, but did you really expect a tax preparation specialist like Jackson Hewitt to be improving its fundamentals in an environment where free online tax filing options are increasingly available? Even if you felt that for-profit educator Apollo would be doing well as folks try to improve their academic skills in this soft economy, did you think it would thrive?

This list should be an eye-opener: Even in this cascading stream of a market, there are salmon fighting the rush to head upstream and slip past the hungry bears. That's why I'm looking. It's why my friends went knocking. And it's why you should be joining us, if not as members, then at least as believers that now is the best time ever to bone up on market research. It's no surprise that one of those seven stocks is an active Rule Breakers recommendation.

Opportunity is knocking. You don't have to swing the door open right away. In fact, you probably shouldn't. Take the time to look through the peephole. Relish the joy of knowing what others don't. Be on the lookout for companies with improving fundamentals, and add them to the list.

If you'd like to use our research as a starting point, you can read our dispatches from our Silicon Valley interviews and take a peek at our favorite stock selections for new money now. Just click here for your 30-day free guest pass to our Rule Breakers stock research.

This article was originally published on Oct. 20, 2008. It has been updated.

Longtime Fool contributor and Rule Breakers analyst Rick Munarriz does not own shares in any of the stocks in this article. GeoEye is a Motley Fool Rule Breakers selection. Jackson Hewitt is a Motley Fool Inside Value pick. The Fool hasa disclosure policy.

Author

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time with more than 20,000 bylines over those 22 years. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he splits his time living in Miami, Florida and Celebration, Florida.
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